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Egypt Tops in Offshore Services Location Index in Mena

Egypt ranks number one in the Mena region in the 2017 Global Services Location Index (GSLI), advancing two places from last year on a global scale while the UAE ranks second in the region, advancing five places on the global list.

The index, released by A.T. Kearney, analyzes and tracks the contours of the offshoring landscape in 55 countries across three major categories: financial attractiveness, people skills and availability, and business environment.

The GSLI brings rigor to companies’ decisions about where to locate offshore operations and sheds light on their complex and shifting choices, particularly in the business process outsourcing (BPO) arena.

Chinese Huawei opened a support and training facility to support 29 countries in the Middle East and Africa in the past 18 months, highlighting an emerging trend in which Chinese companies are seeking offshore destinations to support global expansion, it said.

The eighth edition of the GSLI, titled The Widening Impact of Automation, chronicles the growing threat to BPO jobs in both developed and developing economies — estimating that 1 million jobs are at risk in just four countries — and sheds light on the gap this is creating with the rest of the global outsourcing market.

The study’s findings reveal a far bigger change in global employment stability than in shifts in the country rankings. In fact, the top-ranking countries have undergone few changes in position since the 2016 GSLI.

“Though the top three countries have remained in the same order every year since the study’s inception in 2004, we have begun to see a widening gap between #1-ranked India and all the rest, starting with a significantly larger lead over the country ranked second, China,” notes Arjun Sethi, partner and global head of A.T. Kearney’s Digital Transformation Practice and co-author of the study.“But we are now far enough into the trend toward automation to see that substantial job loss is inevitable in all countries involved in the BPO industry, as hundreds of thousands of low-skilled and repetitive jobs are replaced by automation.”

In Egypt, the government’s decision to allow the local pound to float against the dollar and subsequent depreciation has given the country a competitive advantage. Egypt graduates approximately 500,000 students per year, with 10% in IT-related fields and other fields related to BPO, representing one of the largest qualified labor forces outside of India, adding further pressure, particularly in low skilled jobs.

GSLI is the premier ranking of location amenability for companies looking to relocate functions such as financial services, accounting, and customer service, this year’s study also takes a broader view of the likely implications of automation in several types of economies around the world.

“What’s new in this year’s findings is that we see the effects of automation hitting white-collar service profession jobs,” said Johan Gott, A T Kearney principal and co-author of the study.

“Lower-cost nations have experienced tremendous increases in high-quality employment and transformational economic growth in recent years. Indeed, this has been a large part of their economic development strategy. But now, automation is reversing the flow of countries such as India and the Philippines, which have benefited from labor arbitrage. Our goal is to help companies make sound decisions about which pieces of the activity value chain should use automation and on retooling people into higher-paid jobs.”

2017 GSLI Highlights• India, China, and Malaysia are once again the top-ranked offshoring destinations, with India pulling way ahead of all other countries.• Indonesia and Brazil have swapped rankings for 4th and 5th position respectively.• Mexico fell out of the top 10, while the United Kingdom moves into the top 20, and Peru leapfrogs 27 spots to #20.• The bigger news, however, is the massive job loss as a result of automation. The study estimates only one new position will be created for every four that are lost.